Question

AVLSN Co. plans to issue a $1,000 par value, 20-year noncallable bond with a 6.00% annual coupon, paid semiannually. The company's marginal tax rate is 39.00%, but Congress is considering a change in the corporate tax rate to 21.00%. By how much would the component cost of debt used to calculate the WACC change if the new tax rate was adopted?

Answer #1

The Lincoln Company sold a $1,000 par value, noncallable bond
several years ago that now has 30 years to maturity and a 6.00%
annual coupon that is paid semiannually. The bond currently sells
for $925 and the company's tax rate is 35%. What is the after-tax
cost of debt for use in the WACC calculation?

The
Lincoln Company sold a $1,000 par value, noncallable bond several
years ago that now has 20 years to maturity and a 7.00% annual
coupon that is paid semiannually. The bond currently sells for $925
and the company's tax rate is 40%. What is the component cost of
debt for use in the WACC calculation?

Several years ago the Jakob Company sold a $1,000 par value,
noncallable bond that now has 20 years to maturity and a 7.00%
annual coupon that is paid semiannually. The bond currently sells
for $875 and the company’s tax rate is 25%. What is the component
cost of debt for use in the WACC calculation?

Several
years ago the Jakob Company sold a $1,000 par value, noncallable
bond that now has 20 years to maturity and a 7.00% annual coupon
that is paid semiannually. The bond currently sells for $1015, and
the company’s tax rate is 40%. What is the component cost of debt
for use in the WACC calculation? Round to 2 decimal
places.

Several years ago the Jakob Company sold a $1,000 par value,
noncallable bond that now has 20 years to maturity and a 8.00%
annual coupon that is paid semiannually. The bond currently sells
for $925 and the company’s tax rate is 25%. What is the component
cost of debt for use in the WACC calculation?
Please show all work

A company sold at $1000 par value, noncallable bond
that now has 20 years to maturity and a 7.45% annual coupon rate
that is paid semiannually. The bond sells for $917, and the
company's tax rate is 32%. What is the component cost of debt for
use in the WAAC calculation?

Several years ago the Jakob Company sold a $1,000 par value,
noncallable bond that now has 15 years to maturity and a 6.00%
annual coupon that is paid semiannually. The bond currently sells
for $1,200, and the company’s tax rate is 20%. What is the
component cost of debt for use in the WACC calculation?
Use Nominal rates. Do not round your intermediate calculations.
State in percentage terms without the percent sign symbol and round
to the second decimal place....

Assume a par value of $1,000. Caspian Sea plans to issue a 6.00
year, semi-annual pay bond that has a coupon rate of 8.02%. If the
yield to maturity for the bond is 7.69%, what will the price of the
bond be?

Several years ago the Jakob Company sold a $1,000 par value,
noncallable bond that now has 22 years to maturity and a 7.00%
coupon that is paid semiannually. The bond currently sells for
$835, and the company’s tax rate is 40%. What is the AFTER-TAX
component cost of debt: ((rd)(1-T))?

Several years ago the Jakob Company sold a $1,000 par value,
noncallable bond that now has 8 years to maturity and a 7.80%
annual coupon that is paid semiannually. The bond currently sells
for $840, and the company’s tax rate is 28%. What is the
component cost of debt for use in the WACC calculation?
Use Nominal rates. Do not round your intermediate calculations.
State in percentage terms without the percent sign symbol and round
to the second decimal place.

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